NXP Semiconductors N.V.(NXPI) suffered amid the COVID-19 pandemic because several of its end-markets were hit severely by the public health crisis. However, it made a strong comeback during the second half of 2020 thanks to strong trends in especially in the Automotive and Mobile sectors .
The stock has gained 77.4% over the past nine months to close Friday’s trading session at $209.19. It is currently trading 3.4% below its 52-week high of $216.24, which it hit on April 5, 2021.
The company resumed operations at its manufacturing facilities in Austin, Texas on March 11, following the state’s severe winter storm. It paid an interim dividend of $0.56 per ordinary share on April 5, 2021 and its board of directors approved a new $2 billion 2021 share repurchase program. Also, NXPI was added to the S&P 500 index on March 22, 2021.
Click here to checkout our Semiconductor Industry Report for 2021
Here are the factors that we think could influence NXPI’s performance in the coming months:
Increasing Application of ADAS in EVs
Advanced driver assistance systems (ADAS) are becoming an integral part of electric vehicles (EVs). They require high performance transceivers to enable safety critical applications. NXPI is well-positioned in this regard. Its solutions include radar transceivers and DSRC safety modems, which help in developing complex ADAS systems for automotive applications. The radar systems constantly sense the distance between vehicles in real-time thus improving driving efficiency and safety. In fact, according to a study conducted by BlueWeave Consulting, the global ADAS market was worth $25.10 billion in 2020 and is expected to reach $69.40 billion by 2027, growing at a CAGR of 16.4%.
Robust Financials
NXPI’s top line climbed nearly 9% year-over-year to $2.51 billion for the fourth quarter, ended December 31, 2021. Its revenue from the automotive segment, which accounted for nearly 48% of total revenue, increased 8.8% year-over-year to $1.19 billion for the quarter. Its gross profit increased 6% year-over-year during the fourth quarter and its net income came in at $320 million, up 160.2% year-over-year.
Favorable Analyst Estimates
Analysts expect NXPI’s revenue to come in at $2.56 billion for the quarter ended March 31, 2021, which represents a 26.4% increase year-over-year. Its EPS is expected to grow 137.2% for the quarter ending June 30, 2021, 53% in fiscal 2021 and at a rate of 16.8% per annum over the next five years.
It has an average broker rating of 1.56. Also, of 27 Wall Street analysts that have rated the stock, six rated it a Strong Buy and 14 rated it a Buy.
POWR Ratings Show Promise
NXPI has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. NXPI has a B grade for Momentum. This is justified given its 47.8% gains over the past six months and 13.8% returns over the past month.
It has a B grade for Growth and Sentiment also, in sync with expected earnings growth and favorable analyst estimates.
Beyond what we’ve stated above, we’ve also given NXPI grades for Value, Stability, and Quality. Get all NXPI ratings here.
NXPI is ranked #34 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
If you’re looking for other top-rated stocks in the Semiconductor & Wireless Chip industry, with an Overall POWR Rating of A or B, you can access them here.
Bottom Line
NXPI is a great pick given its wide range of products that are applied across several sectors, such as automotive, wireless and wireless infrastructure, and mobile communications. With the increasing application of ADAS in EVs, the company is also expected to thrive as the demand for EVs increases in the upcoming months. So, we think one should not miss the opportunity to bet on the stock now.
Click here to checkout our Electric Vehicle Industry Report for 2021
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NXPI shares were trading at $206.47 per share on Monday morning, down $2.72 (-1.30%). Year-to-date, NXPI has gained 30.24%, versus a 10.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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